Cost of Direct Competition
Obviously, your most important objective as a small business is to survive
and make money. Realistically speaking, there may be times when you'll decide,
after careful analysis, that the competition in one area is simply too hot. Here
are some situations that may indicate that the cost of direct competition is
unwise and ineffective, from a sales and marketing perspective:
- When you are faced with taking a loss on any marketing program.
Breakeven spending should also be avoided when done in response to
- When your direct competitor can outspend you both in money and quality
of the offer. Larger competitors can almost always outspend you whenever
you try to match one of their programs. They can spend more money for longer
periods and increase the depth and quality of their discounts and
- When your competitor's resources are significantly larger and more
effective. It may make little difference if one of your direct
competitors has eight sales people and you have six sales people covering
the same geographic area and accounts. However, if your competitors can
deliver programs faster on a broader front and still not commit all their
forces, you are significantly outgunned. No battlefield general or business
manager should risk a head-on confrontation.
- When your competitor has more strategic and tactical advantages.
Equal competitive resources may still be strategically and tactically more
advantageous than your company's resources. For example, a competitor who
spends the same amount in the same media but has higher recall/better-liked
advertising has a strategic advantage. Or a competitor who has strong
distributors in all your company's markets, while your company has a few
weak distributors in the same markets, has a tactical advantage.